The future of almost eve.., p.19
The Future of Almost Everything, page 19
Territorial disputes and armed conflicts
Expect China to expand regional influence, largely through economic means, with a range of strategies. China is unlikely to be territorially ambitious, except in the case of sparsely populated islands, which would enable it to extract new energy or mineral resources. China will have challenges managing all the territory it already controls, including Tibet.
As with Russia, events from the Second World War are likely to continue to overshadow foreign policy, in particular the relationship with Japan. This particularly relates to alleged atrocities which are downplayed by many Japanese leaders.
Expect ongoing complaints by many global businesses and smaller investors that business is difficult in China. Expect some multinationals to pull out altogether, blaming a wide range of barriers to business including corruption, red tape, hostility by government to companies that take profits out of China, careless attitude to intellectual property, ruthless self-interest, lack of transparency in business dealings, etc. Revlon, L’Oréal (Garnier brand) and Yahoo were among the first to abandon China.
Chinese companies to watch
Alibaba – world’s largest e-commerce platform, specialising in business to business sales.
Lenovo – bought IBM’s computer business, now world’s largest PC maker, bought Motorola’s smartphone business and IBM’s server business. Third-largest smartphone maker after Apple and Samsung.
Huawei – second-largest telco equipment company in world, banned from US and Australia public sector contracts over fears that its equipment could be used to spy on behalf of the Chinese government.
Xiaomi – China’s Apple – smartphone and tablets; threat to Samsung.
Tencent Holdings – 650 million users of messenger App, fifth-largest internet company in the world in 2014 after Google, Amazon, eBay and Facebook. Highly innovative.
Baidu – main search engine in China, with 66% of market, fits in with government rules.
ZTE – one of world’s 10 largest smartphone companies, also telco network equipment. Expect huge success for their ultra-low cost smartphones.
China’s economy will be three times the size of India’s in 2025, as it is today, but we can expect that India will close that gap in the longer term.
Future of India – growth of global services
India is a highly globalised nation of nations, the largest democracy on earth, and the third largest economy in the world in terms of PPP. India has a key advantage in international trade and service delivery because English is a national language, alongside Urdu and many other languages, unlike in China where English is hardly spoken.
Expect India’s economy to grow 5–7% on average over the next decade. However, just as China is becoming too expensive a location for many multinationals in terms of outsourcing manufacturing, India is becoming increasingly expensive for outsourcing of services. Salaries are rising 3–5 times faster for senior managers in some sectors than in Europe or America. And as in China, India’s long-term future will depend on growth of its own internal markets.
A single State, Andhra Pradesh, has over 200 million citizens, of which 75 million speak Telugu. Karnataka state has 52 million people, including Bangalore. The minister for health oversees no less than 114 medical and pharmaceutical colleges, while the minister for education has 15 universities, 131 engineering colleges and 600 industrial training institutions.
Young and highly ambitious, well-educated workforce
Half the population of 1.2 billion people are under 26, and this single fact will drive economic growth more than any other over the next 30 years. More than 66% of the national wealth is generated by India’s 646,000 towns and cities, and this will increase rapidly with the arrival from rural areas of a further 300 million people over the next 25 years. Population growth is also the reason why income per head has remained much lower than China, despite national economic growth – more wealth but more mouths to feed.
India’s central government will continue to exercise far less national power than in China, and this will mean fewer large-scale national programmes for energy, infrastructure, industrial parks, and so on.
However, India is a nation of industrious, well-educated and highly ambitious entrepreneurs, and is exceptionally well connected globally with hundreds of millions of people in its diaspora, often in highly influential roles across the world.
Despite outward signs of busy chaos, India will remain one of the best places in the world to make things happen fast. This is a country that is able to deliver from an empty concrete shell with no facilities a complete working call centre with trained staff and 24-hour video links to Europe, less than 12 weeks after signing a contract.
Religious caste and corruption in India
India will continue to be a highly tribal and religious society, with many internal tensions, particularly between the majority Hindu, Muslim, and to a lesser extent Christian, communities. Expect outbreaks of ethnic violence, triggered by accusations of favouritism by authorities to one group or another, particularly in periods leading up to elections. The caste barriers of India are becoming less severe, especially in cosmopolitan cities, but the whole caste system will look even stranger in future, in a global system that increasingly adopts human rights legislation.
Corruption will continue to hold India back, despite popular anger and calls for reform. It is institutional, and at every level – some estimate that politicians and government officials may be pocketing bribes of more than $3bn a year.
India’s global status
Expect India’s profile to grow rapidly. Indian influence and culture will also grow thanks to more than 200 million Indian managers and executives working around the world. India’s voice is still missing at the table of the five permanent members of the UN Security Council, at G7 leadership summits, and so on. This is likely to change by 2030 as part of a restructuring of the UN and other bodies.
Future of America
While China has been a natural base for global manufacturing, and India for many global services, America is the dominant ‘home’ location, with 128 of the world’s largest 500 multinationals, accounting for 70% of all global trade. China is rapidly catching up, with 95 already.
America remains in many ways the most globalised nation on earth, despite all the calls from activists for more trade barriers, and will continue to be a premier destination for well-educated, highly skilled migrants. America’s future will be redefined globally by the emergence of nations such China, India, Brazil, Indonesia, Malaysia and the recovery of Russia.
At the same time, America will continue in some ways to be one of the most isolationist nations, partly a consequence of geography, with such huge distances to Europe, Asia or Africa. America’s multinationals will continue to dominate global trade and services and America will also continue to be the only global superpower for the next 20–30 years, despite relative decline in GDP. America will continue to be self-confident and nationalistic, rallying around the American flag and other symbols of the American way.
America will take more than a generation to adjust to a more modest world status, as further global superpowers emerge. It will still be the case in 2025 that most US citizens have never owned a passport. This will mean that a new generation will lack experience of how people think and feel in other nations, which will result in lost opportunities, and will reinforce isolation.
Oil and health revolutions across America
The US is likely to become a larger oil producer than Saudi Arabia by 2020. Shale gas could add 3.3 million jobs and around $500bn a year to the US economy by 2020, depending on global oil prices.
America will continue a transition to health care mainly funded by the state (already the case today), despite much hostility to the concept of free care. As we have seen, the US spends 30% more per person on health than any other developed nation – around $750bn, of which up to 10% is lost because of fraud.
America will continue to be a gun-loving and violent society, compared with Europe. America has the world’s third-highest murder rate per million people – beaten only by Honduras and Venezuela. Guns are used to kill around 10,000 people a year, and almost twice that number commit suicide using a firearm. Ordinary citizens own over 300 million non-military pistols, rifles, shotguns and machine guns – more than the size of the entire adult population.
Influence of race and religion on future US life
America will also continue to be deeply challenged at times by issues of racial equality and prejudice, and by the fact that 45 million voters now speak Spanish as their first language.
Over 11 million people in the country are illegal residents, and have been there for an average of 13 years. America spends $2bn a year keeping illegals in detention, more than on the prison service, and the nation spends more on immigration control than on all Federal law enforcement. Expect steps to be taken (eventually) to formally recognise most of the remainder as members of American society.
Despite a rapid decline in church attendance, America will remain deeply influenced by religion. Six out of ten Americans believe that God heals people in response to prayer. Four out of ten believe that God created humans just 10,000 years ago, and six out of ten oppose (almost) all abortion. Churches in America will tend to become much larger or much smaller, with a decline of medium-sized congregations.
Globalisation of retail and e-commerce
National and regional retailers are being hit by a wide range of global customer trends, each of which could destroy them in their present form. Indeed, every single trend in this book will affect retail to one degree or another.
Mega-chains will dominate retail growth
In many EU nations, over 70% of all retail spending is in just four or five retail chains, and across the EU as a whole, 50% of all food sales take place in just ten chains. In Germany, 37% of all food retail is now in budget stores like Lidl or Aldi. Expect to see a similar unstoppable trend in every other nation, driven mainly by global or regional retailers, unless governments pass laws to halt these semi-monopolies.
As a result of all this consolidation, national food and drink markets will be dominated by small numbers of central buyers, setting national prices for milk, or bottled water, or other basics. This will be a very tough period for local farmers.
National price wars will become regional price wars. Big regional chains will push some national food industries against the wall, because they are able to import huge volumes of lower cost (and possibly lower quality) alternatives from other nations.
Sales by chains in the EU have grown rapidly – by up to 25% over the last 14 years, but floor space has often grown at twice that rate, so productivity has fallen. And the value of total EU food sales has also fallen over the last decade or so. One reason is of course that more people are eating out more often. That could mean a sandwich in a coffee shop, or a restaurant meal. The fact is that living standards will continue, on average, to rise across Europe, so buying food to cook at home will become less important to customers.
Too many new stores
Across every type of retail we have seen more shopping centres and other new outlets built, but for every square metre of new retail space, another metre needs to close and will close. Therefore, we can expect pressure on rents for commercial retail space, and see the demise of huge numbers of smaller stores, as well as some hypermarket outlets. And that is without taking into account the growth of online sales.
Many large out-of-town grocery stores will close across Western Europe over the next decade, as middle-class shoppers shift away from large weekly purchases, to buying food several times a week from local stores, open 24 hours a day and owned by large chains.
Buying food ‘just-in-time’
Around four out of ten adults in the UK have no idea by 4pm what they are going to eat later that evening. Impulse, grazing, and exploring are part of the daily leisure routine, even though this is an expensive way to feed oneself. But then the average supermarket shopper throws away up to 30% or more of the fresh food they buy.
Each community is different, and the most successful chains will use Big Data to predict different product combinations to stock in each local store for maximum sales. Over 60% of their trade will usually come from people who live less than 700 metres away.
Price, quality or brand?
Retailers will have to be clear about how they aim to grow. Competing on price alone will mean a savage fight to the bottom on profitability. Only the largest and most efficient retailers will survive such a contest, and many will experience huge profit losses in the battle.
Apart from scale, the only other reliable way for retailers to compete on price will be to stay very small, with tiny overheads, trading from local market stalls, on street corners, or using virtual equivalents such as eBay.
Future of supermarkets and food retail
Hypermarkets, supermarkets, convenience stores, corner shops, niche outlets – all are faced with similar challenges when it comes to selling food.
There are 7 key things that each can try to offer customers but it will be almost impossible to score highly on all of them, and still make a profit. To some extent, these same 7 factors affect every other type of retailing – whether fridges or carpets.
PRICE – SPEED – CHOICE – QUALITY –
EXPERIENCE – INSPIRATION – TRUST
So a convenience store may focus on speed and experience, while the hypermarket offers lower prices and better choice, and the premium niche store goes for quality, experience and inspiration. The middle market in groceries is going to be squeezed further by discounters as well as premium outlets.
But they all need to focus also on trust. Without trust a food store has nothing to sell, which is why reputation is vital in this industry.
Touch – smell – feel
One of the most important reasons that people shop physically rather than online is because they want to inspect what they buy, explore what is available. But the other day I wandered into a supermarket and found most of their fruit and vegetables in tightly sealed plastic packaging. Expect more stores to direct fumes from their in-house bakery into the store entrance, or offer tasting sessions with regional cheesemakers or wine experts.
Improve the customer journey through the store
Many superstore layouts are specifically designed to confuse customers a little, so they take longer journeys, which are constantly interrupted by end-of-aisle special offers.
I went shopping recently in a store I used to visit quite a lot. The entire layout had changed. Nothing was where I expected. I had to keep asking where basic things were like bread, milk and eggs. At every corner, a stack of unrelated products were shouting for attention – wine boxes with the milk and dairy section, chocolates and batteries in the fruit section. What a mess. Designed to encourage impulse spending of course but guaranteed to frustrate and slow down a considerable number of people. As we saw in Chapter 1, customers are becoming very, very impatient and every second counts.
Piles of stuff in the aisles on special offer may seem like a good idea to the team trying to shift that product line, but then you see customers bashing trolleys into each other because the aisles are partly blocked. These kinds of errors may have worked in the past and supermarkets may think they are being rewarded with additional sales, but in future they will find they are more likely to annoy and alienate customers.
Smart offers at great prices
Every large store should be using Big Data to create clusters of special offers, vouchers, discounts, sent to customers at home or on email or in SMS, based on things it ‘knows’ they will like.
Expect more retail chains across Europe and other nations to print price comparisons on every receipt, showing every customer how much their total bill would have been at 3 or 4 other main competitors. If customers have saved money, wonderful. If they have spent more than they would have done elsewhere, the store will print a voucher equal to the amount they are ‘owed’, to spend against their next shopping bill.
Specialist food retail outlets – many opportunities
We will see the return of the small specialist food store (at least in higher-income areas), satisfying customers who are looking for expert advice and inspiration from retailers who really know about their products – e.g. cheese shop, butcher’s, deli.
Many niche stores of all kinds will be very successful (not just in food retail), offering specialist ranges of products to highly selective consumer groups for a premium price. The best specialist stores will do well, typically run by a single owner-buyer-retailer who hopes to have similar tastes, interests and style sense to its customers.
Street markets
Street markets will continue to be popular: providing buzz, energy, ‘street atmosphere’, local variety, niche experts, and constant variety. Expect larger chains to experiment further with trying to create market-stall atmospheres in parts of their larger retail areas, and large shopping malls to look to create street markets within their walls. All in response to the greatest challenge of all to traditional retail grocery stores – boredom. Same products, same look and feel, same experience. Customers want consistency, but they also need to explore and be excited.
Global e-commerce more than $5 trillion by 2025
Online sales are an even greater threat to traditional retailing than large chains or budget warehouses. Global online sales will roar ahead to more than $5 trillion by 2025, from $1.6 trillion today, with most transactions taking place on mobile devices.
Over 30% of all UK shopping apart from groceries is already online, growing at 10% a year, mostly via mobiles, and more than twice the level of sales per person as in America. E-commerce is also growing at 30% a year in Asia. It all adds up to the biggest change in retailing for a generation, and will mean huge pressure on all physical stores in mature markets like the EU. And as physical retail declines, so we will see lower tax revenues from business rates.
